Baby boomers have been blamed for pushing interest rates down to low levels and blocking the economy.
Although a cash rate of one percent is good for those who already have a mortgage, it is bad for tenants or people who live with their parents because they save for a 20 percent down payment on their home loan.
It also weakens the Australian dollar and makes foreign holidays more expensive, while a weaker economy makes it harder for employees to get a decent wage increase.
The Reserve Bank of Australia lowers rates when the economy is slow in an effort to encourage more spending and home purchases.
Baby boomers have been blamed for pushing interest rates down to low levels and blocking the economy. RBA economists Elizabeth Kendall and Daniel Rees have blamed pensioners for the fact that the cash rate is now at a record high
RBA economists Elizabeth Kendall and Daniel Rees have blamed baby boomers for the fact that the cash rate is now at a low point.
& # 39; The need to finance retirement consumption creates a precautionary motive for employees & # 39 ;, they said in an internal research paper from Daily Mail Australia.
& # 39; Everything else is equal, a higher saving by households increases the capital / labor ratio, reducing the marginal capital product in the natural interest rate. & # 39;
Their paper was given to Liberal MP Tim Wilson, who is chairman of the Economic Committee of the House of Representatives.
It was claimed that many retirees with a longer life were reluctant to spend.
The Australian economy has been growing at the slowest pace since the global financial crisis ten years ago, and the frugal baby boomers are not helping to create more work.
& # 39; Uncertainty about the time of death means that retirees do not fully use their accumulated assets when they retire, & # 39;
& # 39; More of the population are pensioners, who could increase consumption.
& # 39; Retired people now consume much less. & # 39;
Although a cash rate of one percent is good for those who already have a mortgage, it is bad for tenants or people who live with their parents because they save for a 20 percent down payment on a loan
A story about two major cities leading the recovery
SYDNEY: accommodates 1.5 percent to $ 877,220; apartments rise 1.8 percent to $ 699,126
MELBOURNE: accommodates 1.3 percent to $ 716,542; apartments with 1.5 percent to $ 540,056
CANBERRA: accommodates 1.1 percent to $ 665,887; apartments down 0.3 percent to $ 426,088
HOBART: accommodates 0.8 percent to $ 498,734; apartments fell 0.9 percent to $ 375,831
BRISBANE: houses flat at $ 533,101; apartments increase by 1.1% to $ 375,423
ADELAIDE: accommodates 0.3 percent to $ 462,945; units increased by 0.4 percent to $ 322,142
PERTH: homes falling 0.6 percent to $ 454,774; units a decrease of 0.1 percent to $ 345,311
DARWIN: accommodates 1.6 percent to $ 470,099; apartments fell 0.5 percent to $ 289,687
Source: CoreLogic Home Value Index for August 2019
The RBA paper also acknowledged that many Australians with insufficient savings retired later, which affected the gross domestic product – the value of all goods and services produced in the economy.
"Higher participation and later retirement means that a larger share of income is due to employees who have a lower marginal tendency to consume," it said.
& # 39; The share of consumption in GDP is falling. & # 39;
Many older Australians have their own homes and took out mortgages, while house prices in Sydney and Melbourne in particular were considerably more affordable for people with an average income than now.
Nonetheless, many baby boomers are entering retirement age with mortgage debt.
A report from the Australian Housing and Urban Research Institute, published last month, showed that between 1987 and 2015, the proportion of 55-64 year-olds still paying off a home loan more than tripled, from 14 to 47% because wages have not been able to keep up with rising property prices.
Head of Digital Finance Analytics Martin North, an economist, said it was unfair to blame baby boomers for record low interest rates.
& # 39; More baby boomers are retiring with a large mortgage & # 39 ;, he told Daily Mail Australia on Tuesday.
& # 39; That is a new phenomenon. That means that they are much more worried about paying off that mortgage. & # 39;
This often caused baby boomers to use their retirement to pay off their mortgage, with the average Sydney house price of $ 877,220 more than 10 times an average, full-time salary of $ 85,000.
Many older Australians own their own homes and took out mortgages when house prices in Sydney (photo) and Melbourne in particular were considerably more affordable for people on average incomes than now. Nonetheless, many baby boomers are entering retirement age with mortgage debt
Others struggled to live off their bank savings, with deposit rates typically less than two percent, after interest rate cuts.
& # 39; Baby boomers are holding them there, not just because they do not want to spend, & # 39; said Mr. North.
& # 39; They are holding them there because they should actually have that income during retirement.
& # 39; What the Reserve Bank does not understand is that there are three million households in Australia that are highly dependent on income from that bank deposit & # 39; s. & # 39;
Economists expect the Reserve Bank of Australia to lower interest rates twice more, which would raise the cash rate to a new low of just 0.5 percent.
North said more interest rate cuts would only discourage baby boomers from spending money because they struggled to live off the meager interest on their bank savings.
& # 39; Picking up baby boomers is probably missing the point – I honestly blame the Reserve Bank, & # 39; he said.
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